In Florida, debts owed by the decedent are not automatically resolved after death. In fact, the decedent’s creditors are entitled to submit claims against the estate for up to two years from the date of the decedent’s death.
When there are significant debts owed by the estate, it’s important to consult qualified Fort Myers probate lawyers for assistance with estate administration.
If there are significant creditor claims against an estate, distribution of assets to the intended beneficiaries may be affected. Creditor claims in Florida take priority over the those of the estate beneficiaries with respect to non-exempt probate assets. This can result in an unintended “chipping away” of the beneficiaries’ share. It can also result in some creditors getting paid while other creditors don’t.
Creditor Priority and Payment
After Letters of Administration are issued by the court, the personal representative of the estate must serve the Notice to Creditors on potential and reasonably ascertainable creditors. Those creditors must file a statement of claim with the court before the applicable deadline which is three months after the date of first publication of the Notice to Creditors (for unknown creditors), and 30 days after receipt via formal notice (i.e. certified mail). The personal representative or an other “interested person” in the proceedings may object a creditor claim.
Not all creditor claims are treated equally. There is a priority hierarchy for payment. Probate administration costs and expenses are entitled to reimbursement from the probate assets before any other creditors can secure payment of their claims. Examples include court filing fees, newspaper publication costs, attorney fees, personal representative fees, accountant fees etc..
Section 733.707 of the Florida Statutes establishes priority for payment of remaining creditor claims in the following order:
- Funeral expenses up to $6,000.00
- Federal debts and taxes
- State debts and taxes
- Medical and hospital expenses of the last 60 days of the last illness of the decedent Family allowance
- Arrearage from court-ordered child support
- Debts acquired after death by the continuation of the decedent’s business, in accordance with s. 612(22), but only to the extent of the assets of that business.
- All other creditor claims
All creditor claims that have been filed against the estate must be resolved before the personal representative can continue with the probate administration process and distribute the assets to the intended beneficiaries.
Automatic Succession Can Affect Fort Myers Creditor Claims
Creditor claims can only be made against probate assets that were owned individually in the decedent’s name and against assets owned by the decedent’s revocable trust. Assets distributed by payable-on-death or transferrable-on-death designations are not probate assets. They are not subject to creditor claims. Also, property owned jointly with rights of survivorship is not a probate asset. They are not subject to creditor claims either..
For example, two friends may own real estate as joint tenants with rights of survivorship. When the first friend dies, the surviving friend automatically becomes the owner of the entire property. Creditor claims against the probate estate of the friend that died cannot be maintained against the real estate because it is not a probate asset.
What Property Is Exempt From Creditor Claims?
In Florida, the homestead exemption ensures that homestead property is shielded from creditor claims so long as it is properly devised to the decedent’s heirs. It is Florida homestead property if at the time of death the decedent resided or intended to make it their permanent residence. If the residence is located outside a municipality, homestead shall be to the extent of 160 acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality. If the residence is located within a municipality, homestead shall be to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or the owner’s family.
The Florida Constitution requires that homestead property be held as a natural person. However, with the exception of one federal bankruptcy court decision in the middle district of Florida (In Re Bosonetto, 271 B.R. 403 (Bankr. M.D. Fla. 2001)), Florida courts have ruled that ownership of the homestead in a revocable trust does not result in the loss of the homestead protection for purposes of devise.
With the homestead exemption, creditors cannot force the sale of homestead property to satisfy their payment. This is beneficial when there are significant creditor claims that have been filed against the estate.
Section 732.402 of the Florida Statutes describes exempt property for the benefit of the surviving spouse or if none, for the benefit of the decedent’s children, includes the following:
- Household furniture, furnishings, and appliances in the decedent’s usual place of abode up to a net value of $20,000 as of the date of death;
- Two motor vehicles which are not individually in excess of 15,000 pounds, held in the decedent’s name, and regularly used as personal motor vehicles by the decedent or immediate family members;
- Qualified tuition program payments; and
- Benefits paid pursuant to section 112.1915 of the Florida Statutes.
Contact Experienced Probate Attorney Jeffrey A. Attia for Assistance
Here at the Law Office of Jeffrey A. Attia, we have assisted numerous clients with estate planning and estate administration issues, including those that involve creditor claims. If you have questions or concerns about how creditor claims work in Florida, we can help.
Call us today at (239) 919-2318 to schedule a free consultation with Jeffrey A. Attia or submit an online message through our website.